Governance sets the values of an association and is separate from the day-to-day operational management. How confident are you in your association governance?
McKinsey also identified three improvements for boards – to spend more time on board work, to balance trust with challenging discourse and to appoint an ambitious Chair.
In a Few Good Men, Tom Cruise uncovers the truth of poor governance that triggered an unjust crime, and Jack Nicholson is led away in handcuffs. To their surprise, the two junior staffers who dutifully obeyed the rules of their organisation and followed Nicholson’s orders are dishonourably discharged. No-one wins when governance is poor. But associations can handle the truth of good governance with an efficient, skilled, accountable and diverse board.
And Hollywood, please re-title the movie to A Few Good Men and Women.
- Roles and Responsibilities – There should be clarity regarding individual director responsibilities, organisational expectations of directors and the role of the board.
- Board Composition – A board needs to have the right group of people, having particular regards to each individual’s background, skills and experience, and how the addition of an individual builds the collective capability and effective functioning of the board.
- Purpose and Strategy – The board plays an important role in setting the vision, purpose and strategies of the organisation, helping the organisation understand these and adapting the direction or plans as appropriate.
- Risk Recognition and Management – By putting in place an appropriate system of risk oversight and internal controls, boards can help increase the likelihood that their organisation will deliver on its purpose.
- Organisational Performance – The degree to which an organisation is delivering on its purpose can be difficult to assess, but this can be aided by the board determining and assessing appropriate performance categories and indicators for the organisation.
- Board Effectiveness – A board’s effectiveness may be greatly enhanced through: careful forward planning of board-related activities; board meetings being run in an efficient manner; regular assessments of board performance; having a board succession plan; and the effective use of sub-committees, where appropriate.
- Integrity and Accountability – It is important that the board have in place a system whereby: there is a flow of information to the board that aids decision making; there is transparency and accountability to external stakeholders; and the integrity of financial statements and other information is safeguarded.
- Organisation Building – The board has a role to play in enhancing the capacity and capabilities of the organisation they serve.
- Culture and Ethics – The board sets the tone for ethical and responsible decision making throughout the organisation.
- Engagement – The board helps an organisation to engage effectively with stakeholders.
Good governance is surprisingly dynamic, proactive and far-reaching. Here are some guiding principles.
Unpaid directorships work well for the majority of associations. In these cases, the voluntary structure is appropriate to the resources available, aligned to member expectations and the time and commitment required of directors is not too onerous. However, like the extremities of the bell curve, there are instances where it has limitations.
At one end, there may be cause to consider a paid Chair or board for large, complex associations where multiple, specific best practice skillsets are required in order to achieve objectives, or when the expectation from directors to deliver high-stakes results is unusually challenging. Provision for this in the constitution needs to be subject to approval from a member ballot so that it is clear what new value and benefits directors are delivering from paid positions.
At the other end of the scale, it may be necessary to remind some directors that their voluntary status does not abrogate their responsibilities, and that when the going gets tough the expectation is that they contribute more, not less. The term ‘you get what you pay for’ can be dismissive of volunteerism which is easy to turn on and turn off, so the commitment, diligence and persistence of volunteer directors must remain strong, regardless of the circumstances. In many ways, it can be more difficult to be a volunteer director than a paid one because the expectations to perform are the same, and there are no other perks beyond a sense of fulfilment, belonging and accomplishment.
The Chair needs to manage two peculiarities of volunteer directorships.
The first is the inherent potential conflict of interest when directors are appointed from member companies. Given that individuals or companies join membership-based associations in order to gain some form of benefit, it stands to reason that these directors may find themselves in positions of power that can benefit their companies or themselves personally. Will these individuals act independently as directors in the exclusive interest of their association, or will they be influenced in their roles as customers of the association? The Chair can manage overt instances of bias or self-interest through his or her oversight, but more subtle prejudices may be difficult to uncover.
The second caveat is workload. Assuming that most voluntary directors are not independently wealthy and also have full time jobs to sustain outside of their directorships, workload expectations need to be well managed. It takes time, effort and diligence to perform as a director. It is the Chair’s role to ensure directors are effectively trained for the responsibilities they have, and can manage the workload in addition to their other commitments.
Voluntary directors, like their paid counterparts, need to make a purposeful contribution to justify their continued tenure. It is the Chair’s role to ensure that they do, or to get them to move on in order to keep the board striving toward further progress.
|Extent of Disruption||CEO||Board|
Both boards and CEOs agree on disruption, although CEOs perceive it as more extreme.
|Mission & Vision||58%||62%|
Boards rate current performance against Member Needs higher than their CEOs, but are less confident in their association’s Future Focus or delivering Market/Sector Needs.
|Key Performance Targets||CEO||Board|
|Mission & Vision||18%||29%|
|Annual Operating Plan||35%||19%|
Boards and CEOs report varied perceptions on whether detailed key performance indicators have been applied, but agree that most boards seem to be exempt.
Both sides may benefit from a best practice definition of what constitutes an effective key performance indicator, and from open discussions that align their agreement of how this is being applied throughout the association.
|Excellent Employee Capability||CEO||Board|
Boards and CEOs are in agreement that Passion is the greatest capability of association employees, and that the poorest capabilities are Innovation, Adaptability, Accountability and Engagement. The way forward is a robust debate on internal capacity building – and what the association needs to do to nurture these critical skillsets for the future.
|Excellent Board Capability||CEO||Board|
|Other Board Members||5%||10%|
Unsurprisingly, boards generally self-rate their own performance higher than CEOs. However, the capability scores from both sides on the three most critical board functions were similarly low, with 55% of boards rated as poor/mediocre on Governance, 67% poor/mediocre on Risk Management and 66% poor/mediocre on Strategy. Both point to opportunities for improvement. Evaluating the board’s performance is as important as evaluating the CEO’s and both need to be conducted with diligence and transparency. When the board and CEO discuss how they can both improve in tandem, the association wins.
|Board Volunteer Intention||CEO||Board|
Most agree individuals join volunteer boards for the right reasons – to make a Contribution. But where board directors see themselves as more Altruistic, around half the CEOs perceive them as motivated by Personal Gain or Prestige/Status. Association board directorships provide an opportunity for individuals to have a real impact on the sectors they care about, and it necessarily hurts an association when people take on a board seat for personal motives or don’t take their responsibilities seriously. Boards concede that they are more driven by Power than CEOs estimate – reinforcing the importance of clarity around the separation of powers between the roles.
|High/Total Future Confidence||CEO||Board|
|Achieving Mission & Vision||46%||34%|
While the majority of CEOs are confident of Outperforming Competitors, less than a quarter of boards agree. There is a need for analytical, objective data like market share analysis to settle this point – and inform the strategy. Measuring performance against competitive benchmarks will also serve to bring board and CEO perspectives in line with both one another, and the reality of the market. CEOs are more confident of Overcoming Threats than boards, although this reflects the fact that they also identify fewer threats.